Modern manufacturing processes can achieve good throughput by requiring that manufactured products be screened by better quality control exercised at a quicker rate. This trend in the quality control of manufactured products increases the need for process-oriented precision metrology capable of performing faster inspections and yielding valuable feedback to the manufacturing system. This paper presents a spatially dispersed short-coherence interferometry sensor using diffraction orders of the zeroth and first order for a diffraction grating introduced as a new compact system configuration for surface profile measurement. In this modified design, the diffraction grating acts as the beam splitter/combiner. Diffractions for the zeroth and first orders are represented by the reference and measurement arms, respectively, of a Michelson interferometer, which reduces the optical path length. This innovative design has been proven effective for determining the step-height repeatability in the sensor range from 27 nm to 22 nm for profiles spanning the step heights of the tested specimens.